Monday, December 19, 2016

Demonetisation
has been the most disruptive moment in india's financial space, which
may result in significant gain in long term. Finance Minister hints that
not all the notes to be remonetised, that means digital currency will
fill the gap. This can be termed as eMonetisation, creating a new
normal. Getting cent percent people out of paper currency is a tough and
impossible exercise, it will not happen in the near future. But there
is all probability to translate a huge population to digital modes of
currency. We have already seen a growth in cashless transactions soon
after November 8 declaration.

Digital modes of payments are
already there in our system, but the adoption rate was not that much
high. Now it is the high time to migrate to electronic modes. There are
couple of ways to put you to digital transaction trajectory. In near
future, it is not possible to convert 25 to 30% of population- bottom of
the pyramid- to cashless environment, but at the same time it is much
easy to convert same percentage in the upper strata to less cash regime.
It is the high time to shift our transaction behavior to tune with
present currency crunch situation. This disruption that has been
happened is pushing many people to newer modes of payments. If you are
ready to migrate to digital currency, these three methods would be
helpful.

Plastic Cards: As of August 2016, 712.46
million
debit cards and 26.4 million credit cards are in circulation. But till
demonetisation, our cards are mostly used in ATMs to withdraw currency.
We have about 2.25 lacs ATM centers across the country, and 14 lacs POS
terminals at merchant outlets. The sad point is that POS terminals are
under utilised, at the same time we are over depending on ATMs. The same
debit card which we are using to take money from machine can be given
at shops, medical stores, bill payment spots, fuel filling stations etc.
Here money from your account instantly gets credited to merchant
account via electronic
mode. Apart from this the same plastic card can be used for online
shopping, e Commerce and utility bill payments. If a majority percentage
of our netizen rebooting their style of transactions to card payment
mode, the impact in the cashless
economy would be high. Here money from customer account goes to
merchant account and the same merchant forced to opt the same mode for
the
procurement from main dealer. This is a circle and slowly this 'new
normal' would create a conducive environment to state as well as union
government in many ways.

Mobile / Internet Banking : All
most all the banks are now equipped with their own mobile and internet
banking products. Plastic card is an alternative to cash payments, but
these kinds of channels are actually acting as bank
branches on 24X7 basis. In addition to the fund transfer facility from one person to another, value added services like fee
payment, tax filing, conversion of SB account to fixed deposit, loan
outstanding enquiry etc are possible via this mode, at the
comfort of your home/office. Once the customer is experienced with
mobile/internet banking channels, then all chance to stay tuned with
this window of banking, and this would help to bridge gap between cash and cashless banking.

UPI App: The
latest addition in alternate delivery channel is Unified Payment
Interface, or simply UPI. This is believed to be a real game changer in
Indian Banking scenario. UPI initiative taken by National Payment
Corporation of India to simplify and to create a single payment
interface across all systems. This allows us to instantly transfer money
to another using IMPS framework, even without knowing the other
person's bank account number and its associated IFSCode. In UPI
Application, you can create number of virtual IDs (similar to email id.
eg name@Bank ), and give this virtual ID to another person to
send/collect money. Number of improvements and additions in this UPI
mechanism are on the anvil, which will enable different stake holders to
squeeze the benefits.

One thing is sure, a slow and
steady translation to less cash environment is taking place since long,
and demonetisation acted as catalyst to spur the growth. This
digitisation of currency flow will help banks in many ways and may lead
to lower interest regime. We are in the process of conversion, and have
to continue to make some efforts in order to keep this momentum. Once
the transaction behavior is changed to eMode, then it is for a long
time.

( V K Adarsh
is working with Union Bank of India as Senior Manager(Technical) )